Report Suggests Boost in Interest from Private Equity
Report Suggests Boost in Interest from Private Equity
According to research by the Guardian, investment companies have taken an increased interest in the childcare sector since 2018. At that time, approximately 4% of all nursery places were in settings backed by private equity and venture capital. Over the past five years, that number has almost doubled to 7%. This is a dynamic that has driven changes in the sector’s structure, allowing the formation of larger nursery groups and chains containing dozens or even hundreds of settings. While some voices will always critique the role these outside backers play, others see real advantages for childcare businesses, particularly against a backdrop of funding difficulties.
According to the Guardian’s research, in 2022, private equity and venture capital firms made at least 112 investments. While there are always concerns that investment companies such as these prioritise financial gains above all else, the providers themselves told the Guardian that their provision remains high quality. Moreover, according to the British Private Equity and Venture Capital Association, investors are committed for average periods of five years. This makes sense in a sector where margins tend to be relatively low, but the underlying demand, backed by government funding, remains very high.
Nonetheless, as the childcare policy debate continues to take centre stage in the long run up to the general election, it will be important for decision makers to understand the real dynamics underpinning the sector as it matures. On the one, hand, certainly investment companies will have different priorities to traditional owner-operators – who still make up the majority of the sector – but on the other, access to significant capital and the creation of economies of scale create many new opportunities. What is critical is ensuring whatever the ultimate funding model, childcare providers are stable and secure, able to prioritise providing high quality education and care for their children – who must always be their most important stakeholders.